IEA: last year’s inaction on climate goals cost us $1 trillion

Right now, fossil fuel use is over five times more subsidized than renewable …

Each year, the International Energy Agency produces a report in which it considers trends in energy use and makes projections for the future. Usually, these reports simply take recent trends and project them forward, but this year's is somewhat different: its author uses a mixture of current trends and the projected impact of countries' pledges for reducing greenhouse gas emissions and subsidies for fossil fuels. This results in some eye-popping figures. Globally, we're subsidizing fossil fuel use to the tune of hundreds of billions of dollars, at a rate of over five times the subsidies going to renewable energy. And our inaction on climate goals has tacked $1 trillion onto the cost of reaching them—in 2009 alone.

We'll start with the subsidies. In 2009, the total subsidies were $312 billion, which may seem high until you hear the 2008 figure: $558 billion, boosted by countries' responses to the high fossil fuel prices that year. Most of the subsidies went to help cut the costs of using oil and natural gas products; another substantial chunk went to electricity use.

Clearly, subsidies of this sort occur in Western democracies, but the biggest contributors tend to be fossil-fuel rich countries, such as those in Russia, Iran, and Saudi Arabia, although India and China also do a hefty amount of subsidizing. In some cases, these subsidies account for over 10 percent of the nation's GDP; for Iran, it's 20 percent, which works out to nearly $70 billion. By contrast, the global subsidies for renewable electricity and biofuels amounted to only $57 billion.

Earlier this year, however, the G20 members agreed to bring this practice to an end, which the report's author thinks is a very good idea. "Eradicating subsidies to fossil fuels," he concludes, "would have a dramatic effect on global energy balances, enhancing energy security, reducing emissions of greenhouse gases and air pollution, and bringing economic benefits." He estimates that a complete global phase out would cut carbon dioxide emissions by the equivalent of the annual output of Germany, France, the United Kingdom, and Italy.

The report looks forward to what the energy economy might look like by 2020 and 2035. The first scenario considered involves projecting use patterns forward based on the pledges made by nations at the Copenhagen climate conference that year. Unfortunately, the IEA concludes, these pledges are insufficient to meet the stated goal of stabilizing the climate after a rise of 2°C (an atmospheric concentration of 450 parts per million of CO2). Instead, the "timidity of current commitments" means that we're looking at an atmosphere with 650ppm, which would commit us to 3.5°C of warming. So, the second scenario considered what it would take to put us on a path to 450ppm.

For the 650ppm scenario, coal and oil use decline in the OECD countries (primarily Europe and North America), but expand significantly in China and the developing nations. In general, 93 percent of the growth in energy use occurs outside the OECD, with China accounting for over a third of it. This growth is enough to ensure that we don't hit peak oil before 2035, although use has flattened out by then. In contrast, we would need to reach peak oil before 2020 to have the 450ppm scenario be realistic. The decline from that peak will need to be driven by increased use of plug-in hybrids and electric cars, combined with the decarbonization of electricity.

Most of the oil that does get used comes from traditional producers like Saudi Arabia and Iraq. Behind them, however, are Brazil, Kazakhstan, and Canada. The two former nations have been the sites of large discoveries that are not yet developed; development and further discoveries will become increasingly necessary by 2035. Canada will make the list primarily because of extensive use of its oil sands. Nontraditional sources of oil will also play an ever-growing role in the energy economy.

Coal will peak even during the 650ppm scenario, with its decline offset by nuclear and renewables. The latter will triple their share of the global energy mix. Both of these will have to happen much faster to reach the 450ppm target. Coal would need to return to 2003 levels by 2035, and the nuclear/renewable combo would have to provide 38 percent of the world's energy mix. Natural gas will largely hold steady, since it's cheap and relatively clean, with usage gradually adjusting to accommodate the current glut on the market.

Because nuclear and renewables are relatively capital intensive to install, this transition will have to involve heavy government interventions, according to the IEA. These will take the form of both direct subsidies for renewables, and market signals such as carbon taxes.

But the governments will have to act fast to have any chance of getting us to the 450ppm goal that they claim to support. Due to the inaction that dominated the past year, the IEA estimates that it will take a trillion dollars more to stabilize the atmosphere at 450ppm if we start now than it would have if we'd started a year earlier. Any further delay would make matters worse, so much so that the report seems to conclude that it simply won't happen.

126 Reader Comments

What is this $1 trillion, and what is the methodology for arriving at it? And is it $1 trillion 30 years from now, or is it a net present value of $1 trillion, calculated at some estimated rate of return?

The climatology of global warming is on pretty firm ground. The economics, on the other hand, tends to be sketchier.

I would love to see an end to both direct subsidies and externalized costs. Coal is cheap only if you consider the direct cost of physically extracting it, but not if you consider the indirect costs generated from its extraction (stream and ecosystem distruction) or burning it. Dump responsibilities for those costs on the coal industry and see how cheap it actually is

Here's some non-sketchy economics: right now you're happily funding 2 groups of people you don't want to fund. The sooner you can go local for electricity - which can be extracted from pretty much anything instead of some sand-infested place filled with folks that don't exactly like you, the sooner you bring your cash and your jobs back to your country where you need them.

Because nuclear and renewables are relatively capital intensive to install, this transition will have to involve heavy government interventions, according to the IEA. These will take the form of both direct subsidies for renewables, and market signals such as carbon taxes.

Regardless of the legitimacy of Global Warming, this is never going to happen (especially in the US) because it's far to easy to paint whomever votes for these initiatives as anti-business, or a Socialist, or what have you. Having the government impose extra costs on businesses where the businesses would not see any benefit to their earnings is a lost cause.

"Because nuclear and renewables are relatively capital intensive to install, this transition will have to involve heavy government interventions, according to the IEA. These will take the form of both direct subsidies for renewables, and market signals such as carbon taxes."

Not true.

Business can get solar panel systems installed for no cost at all. That is what we had done. They installed the solar panels and will now be charging us market rate for the electricity they produce. After 20 years, that become ours and we no longer pay for the electricity they produce.

Here's some non-sketchy economics: right now you're happily funding 2 groups of people you don't want to fund. The sooner you can go local for electricity - which can be extracted from pretty much anything instead of some sand-infested place filled with folks that don't exactly like you, the sooner you bring your cash and your jobs back to your country where you need them.

Stop thinking about the whales, start thinking about your wallet.

Funding the people in the sand-infested place is one thing. Using their irreplaceable natural resources for OUR gain, while giving them dollars that are steadily decreasing in value?

Genius.

Also, I'd love it if there were natural market incentives for efficiency.

Something is wrong here. Radiative forcing is logarithmic. You're saying 450ppm is 2C, and 650ppm is 3.5. That's not right as at /most/ 650ppm would clock in 2.8C at the 1:1 slope. But we're not on the 1:1 part, we're far past it where it levels off...

There is enough misinformation being spread by the right wing crazy caucus and the oil companies without having so called "allies" discrediting actions that need to be taken by indulging in ridiculous hyperbole.

Here's some non-sketchy economics: right now you're happily funding 2 groups of people you don't want to fund. The sooner you can go local for electricity - which can be extracted from pretty much anything instead of some sand-infested place filled with folks that don't exactly like you, the sooner you bring your cash and your jobs back to your country where you need them.

Doesn't matter, if we stop using Middle Eastern oil, the demand of other countries will take up the slack and indeed, this is what the World Bank envisions. The view of the World Bank is that developing countries will be using more and more oil for another 4 or so decades to help grow their economies faster. And if this happens, guess what Navy will be guarding the oil supply routes and what military will be doing any needed dirty work in the Middle East? That's right, it'll be our guys doing protecting the oil supply routes.

And I don't see the connection between buying oil in the Middle East and outsourced jobs.

Here's some non-sketchy economics: right now you're happily funding 2 groups of people you don't want to fund. The sooner you can go local for electricity - which can be extracted from pretty much anything instead of some sand-infested place filled with folks that don't exactly like you, the sooner you bring your cash and your jobs back to your country where you need them.

Stop thinking about the whales, start thinking about your wallet.

You do know that around 68% of electricity generated in US is from fossil fuel right?

All true - depressingly so. Though we're entering an interesting time as certain renewables (like solar) reach maturity and seriously challenge fossil energy - meaning its no longer a matter of "environmentalists vs The Economy" but some serious competition between big players (and I mean big, there are some very wealthy people with a lot of money tied up in solar now). Expect things to get nasty.

Perhaps an overlooked approach is to bypass national governments and the mess that's in - build cooperation between cities and regions that want to act, and draw people in as the benefits manifest themselves.

Instead, the "timidity of current commitments" means that we're looking at an atmosphere with 650ppm, which would commit us to 3.5°C of warming.

Really??? 'commit' the world to 3.5 degrees C of warming? That exact value, to the tenths place? With no error because of data collection and analysis methodologies, and no uncertainty because of modeling assumptions? Really?? You've got to be kidding me.

Quote:

Due to the inaction that dominated the past year, the IEA estimates that it will take a trillion dollars more to stabilize the atmosphere at 450ppm if we start now than it would have if we'd started a year earlier. Any further delay would make matters worse, so much so that the report seems to conclude that it simply won't happen.

Just more of the same alarmist crap that Ars is continually shoveling onto the front page, without so much as a link to the report so people can read it themselves.

Why do I have this feeling that this trillion comes from trying to meet self imposed climate goals. I think it's time to ditch the global warmingz hysteria, and take a more practical and prudent approch to environmentalism. Particularly in light of proof of the bad science used to prop up the global warming hysteria machine.

The targets have always been politicians making grand statements for things they won't be around to meet.

The economics described here is beyond dubious. The fossil fuel companies pay huge amounts of tax. They pay far more in tax than they receive in subsidies. In most of the developed world (excluding the US) most of what you pay for fuel is tax.

It's really time people started looking toward measures proscribed by Roger Pielke Jnr, Nordhaus, Toll, Lomborg and others. The Climate Fix, the new book by Pielke, is reviewed in the Economist and is well worth reading.

Here's some non-sketchy economics: right now you're happily funding 2 groups of people you don't want to fund. The sooner you can go local for electricity - which can be extracted from pretty much anything instead of some sand-infested place filled with folks that don't exactly like you, the sooner you bring your cash and your jobs back to your country where you need them.

Stop thinking about the whales, start thinking about your wallet.

Renewable energy is great. I think we should do everything within reason to support it. Yay renewable energy.

But just as I hate it when fossil fuel interests try to pull "science" out of their ass, I hate it when people (whether environmental groups talking about costs of inaction or fossil fuel interests talking about insurmountable compliance costs) pull bogus financial numbers out of thin air. I don't believe a word of this $1 trillion figure until I can see a concrete rationale for it with a clear and defensible methodology.

Fossil fuels receive 5x the subsidies of renewable energy? Get out of town! Renewable energy gets vastly more direct subsidy than fossil fuels.

You need to figure the subsidy in dollars per unit energy produced - $/kWh. When we subsidise renewable energy its not because we want the physical infrastructure of panels and windmills, is because we want the energy and power they produce. So you need to consider how much energy do we get per dollar spent.

From a previous Ars article, fossil fuels contribute ~79% of US energy, and solar and wind and geothermal 1.2%. (The balance is nuclear ~8.4%, biomass 3.9%, hydro 2.7%). I don't know whether the IEA includes hydro or biomass as renewable in their accounting. I'll exclude them.

Of course, the other thing we want from renewable energy is emissions reduction. So the correct way to measure this is as dollars per tonne of CO2 avoided ($/tCO2). If we have a finite amount of $ to spend, we really want to make sure we spend it on technologies with the lowest emissions avoidance cost. If we spend our limited money on a high $/tCO2 generator then we are not reducing our emissions as much as we could. Reducing co2 emissions on the scale required is really hard. We can't afford to be inefficient in our use of funds. We need to roll out the low $/tCO2 technologies as fast as possible.

What is the cost of avoided emissions for different technologies? There is an analysis of generation scenarios for the case of Australia (where I am) here:

The cheapest way to reduce emissions is nuclear. The most expensive are wind and solar, by a very large margin. (This will apply equally to the US as Australia, and just about everywhere else.)

I strongly urge people to think about the $/tCO2 avoided metric in energy and climate discussions. tCO2 avoided is "what we want". $ is a measure of "what we can do". $/tCO2 is the right measure for "how much of what we want, can we have?". We want emissions reduction, and we'd better choose the generator technology that maximizes the impact of our emissions reduction budget.

SonicHgHog, you might not have paid for your panels but someone did. The someones are your fellow taxpayers, and they might have their own views on whether your very highly subsidised power (very high $/tCO2) was a worthwhile use of their money.

These are global figures people. Is it really surprising that China or Iran subsidize fossil fuels and that those amounts dwarf global subsidies on renewable energy?

Global warming aside, let's also not forget what CO2 does once it's in the ocean, how it alters plant growth, etc.

Yes, and also, let's not just focus on CO2, there are number of pollutants from fossil energy us that affect us quite severly. Nitrogen oxides being only one, which are the source of many respiratory problems for many people in urban areas. Lake and soil acidification is another issue they cause. Several additives to pump gasoline is carcinogen.

What's really sad is that while the issue of them admitting it being nearly impossible to achieve the 2C/450ppm goal by 2020 is bad enough... the IEA still also expects us to believe its insane graph where they have crude oil production flat line from now until 2035 purely on the basis of oil "yet to be developed or found". That's supposed to account for 75% of production 25 years from now!?

Not only is the graph an insult to anyone with half a brain (as if production of *anything* can be absolutely flat for 25 years)... it pins its hopes on what it says *right there* is a fantasy of undeveloped and/or undiscovered resources.

The prudent among us would hope for the best, but plan for the 75% decline in CURRENT oil production depicted by the graph.

This report should be ringing alarm bells with the public, but I fear, no, I know, the public are mainly too stupid and/or too occupied/oblivious/uncaring to demand action.

Here's some non-sketchy economics: right now you're happily funding 2 groups of people you don't want to fund. The sooner you can go local for electricity - which can be extracted from pretty much anything instead of some sand-infested place filled with folks that don't exactly like you, the sooner you bring your cash and your jobs back to your country where you need them.

Stop thinking about the whales, start thinking about your wallet.

Right, because all those outsourced jobs went straight to Saudi Arabia to work in the oil fields. Oh wait, no they didn't.

It's generally polite to contain your ranting to topics that are actually related to each other.

I live at 6990 feet ASL. i don't give a shit if the waters rise or not. if anything, my land will be closer to the beach and be worth more.

I used to live in Los Angeles and spent months in San Fran, and if anything, being dunked underwater would make both places better, not worse.

i'm not understanding the downsides to global warming. What are they again?

Ya, who cares about the other billions of people on the planet as long as I'm safe in my mountain fortress of solitude. And I'm sure that since you're growing all your own food, the dangers of global warming are unlikely to inconvenience you at all.

Something is wrong here. Radiative forcing is logarithmic. You're saying 450ppm is 2C, and 650ppm is 3.5. That's not right as at /most/ 650ppm would clock in 2.8C at the 1:1 slope. But we're not on the 1:1 part, we're far past it where it levels off...

It's logarithmic, but 0ppm isn't a 0C rise (that would involve having zero carbon dioxide in the atmosphere), the base level would be somewhere around 300ppm (presumably, that's about where it sat in 1900. I think it's presently around 360-370, but don't quote me on that, it's off the top of my head. The article doesn't say what the rise actually is based on, 2C higher than what, yesterday or 2000 or 1990 or 1900?)

Instead, the "timidity of current commitments" means that we're looking at an atmosphere with 650ppm, which would commit us to 3.5°C of warming.

Really??? 'commit' the world to 3.5 degrees C of warming? That exact value, to the tenths place? With no error because of data collection and analysis methodologies, and no uncertainty because of modeling assumptions? Really?? You've got to be kidding me.

Quote:

Due to the inaction that dominated the past year, the IEA estimates that it will take a trillion dollars more to stabilize the atmosphere at 450ppm if we start now than it would have if we'd started a year earlier. Any further delay would make matters worse, so much so that the report seems to conclude that it simply won't happen.

Just more of the same alarmist crap that Ars is continually shoveling onto the front page, without so much as a link to the report so people can read it themselves.

Something is wrong here. Radiative forcing is logarithmic. You're saying 450ppm is 2C, and 650ppm is 3.5. That's not right as at /most/ 650ppm would clock in 2.8C at the 1:1 slope. But we're not on the 1:1 part, we're far past it where it levels off...

It's logarithmic, but 0ppm isn't a 0C rise (that would involve having zero carbon dioxide in the atmosphere), the base level would be somewhere around 300ppm (presumably, that's about where it sat in 1900. I think it's presently around 360-370, but don't quote me on that, it's off the top of my head. The article doesn't say what the rise actually is based on, 2C higher than what, yesterday or 2000 or 1990 or 1900?)

The referred to 2C rise is in relation to the IPCC reports which are based on the pre-industrial CO2 levels and pre-1900 decadal mean temperatures

:Quote: gsfprezI live at 6990 feet ASL. i don't give a shit if the waters rise or not. if anything, my land will be closer to the beach and be worth more.I used to live in Los Angeles and spent months in San Fran, and if anything, being dunked underwater would make both places better, not worse.i'm not understanding the downsides to global warming. What are they again? :Endquote:

It's not going to happen so quick that they all drown you know. Just try to picture millions of failed starlets, OC gangstas, flamboyant gays, weary mexicans, aging hippies and computer nerds walking towards your little mountain in a state of thirst, hunger and shocked desperation. Now add lots and lots of guns...

Very nice article. I wish the Obama stimulus plan would have invested in nuclear and solar so we had something to show for the huge deficit. The current Obama "investment" in america isn't going to have any return whereas energy plants provide power for decades. As financially painful as transitioning U.S. power from fossil to other will be, it will take a backseat to social security, medicare, and medicaid by 2020.

Here's some non-sketchy economics: right now you're happily funding 2 groups of people you don't want to fund. The sooner you can go local for electricity - which can be extracted from pretty much anything instead of some sand-infested place filled with folks that don't exactly like you, the sooner you bring your cash and your jobs back to your country where you need them.

Stop thinking about the whales, start thinking about your wallet.

Actually, damn near every single economist disagrees with that statement. Spending more to keep it local is economically inefficient and harms the economy in the long run.